Ten countries joined the European Union in 2004. At this moment 73 million new EU citizens acquired the right to settle in all other EU member states. But they did not get full access to the European labour market. Free mobility of labour and thus the free movement of workers were and remain temporarily postponed for up to seven years.

Initially 12 out of the 15 pre-enlargement EU member states restricted access to their labour markets for newly arriving citizens of new EU member states. During the period 2004-2006 Ireland, Sweden and the United Kingdom did not implement such restrictions. Only Sweden, however, fully applied European Community law, while the United Kingdom did so in practice, but safeguarded itself by curtailing access of newly arriving EU8 migrants to certain social welfare benefits. Countries like Austria, Italy and the Netherlands offered labour permits on a quota base.

In 2006 Finland, Greece, Portugal and Spain finally decided to give EU citizens from Central Europe and the Baltics (EU8) full access to their labour markets. In 2007 the Netherlands are likely to follow their example.

Study

The study “Labour Markets Unbound?” by Kristof Tamas and Rainer Münz is based on the analysis of available migration and labour market data as well as on four case studies. The study examines labour market effects of EU enlargement under different transitional regimes – liberal regimes in Sweden and the United Kingdom and restrictive regimes in Austria and Germany.

Main Results

The following results can be derived from the analysis:

- In total EU enlargement has let to increased legal migration from new member states in Central Europe and the Baltics (EU8) to Western Europe (EU15). The additional flow has been in the order of 200,000 to 300,000 people per year. This total amount is in line with earlier forecasts that had tried to assess the East-West migration potential during the first years after EU enlargement.

- Transitional restrictions implemented by 12 of the 15 “old” EU member states during the years 2004-2006 have diverted EU8 flows to the UK and Ireland. There the inflow of EU8 labour migrants has been well above levels projected in earlier forecasts.

- EU enlargement has also let to de facto legalization of several hundred thousand EU8 citizens who were irregular residents of EU15 prior to enlargement. A certain proportion of them have meanwhile found regular employment.

- In continental Europe transitional restrictions have definitely not reduced the size of the irregular migrant workforce.

- During the first two years since enlargement (2004-2006) the flow of labour from EU8 to EU15 seems to have been more demand-driven than regulated by the implemented transitional regimes.

- The United Kingdom and Ireland have experienced robust economic growth. There migrant labour from new EU member states has played a vital role in filling labour market gaps and expanding the workforce.

- The Swedish case shows, however, that legal access of EU8 citizens to a West European labour market does not automatically lead to considerable immigration. In this country tight regulations of wages and labour standards at “shop level” have prevented EU8 citizens from effectively competing with Swedish workers.

- Some EU15 countries that had opted for transitional restrictions during the period 2004-06 have also experienced economic migration from EU8. Countries like Austria, Germany, Italy and the Netherlands continued to issue short-term permits to EU8 citizens (as this had already been the case prior to EU enlargement).

- In the case of Austria a flexible handling of short-term permits was able to bridge the tension between additional demand for labour and a restrictive implantation of transitory arrangements. As a result the number of EU8 workers – in particular from neighbouring Hungary and Slovakia – has increased since 2004.

- In Germany the inflow from EU8 – in particular from Poland – initially increased in 2004 despite an overall decline of migration flows to Germany. In 2005, however, unfavourable labour market conditions also seem to have reduced the inflow of additional labour migrants from EU8.

- As a result the share of EU8 labour has more or less remained stable in Germany (at 0.7 per cent of total labour force) and Sweden (at 0.2 per cent of total labour force) during 2003-2005. But they have doubled in Austria (from 0.7 to 1.4) and in the United Kingdom (from 0.2 to 0.4 of total labour force).

- Continued transitional measures also seem to be shielding some sections of the native labour force and service providers from additional competition. At the same time they have the effect of postponing foreseeable market adjustments.

- At the same time countries like Austria and Germany are reporting rapidly growing numbers of EU8 citizens who have registered as self-employed service providers. This can – at least partly – be interpreted as a way of circumventing transitional restrictions.

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